The Geopolitical Effects of the COVID-19 Crisis

After more than a month of manifest global crisis, it is apparent that COVID-19 will have a major effect on the global economic system and thereby create unpredictable geopolitical changes. No one can yet reliably predict how events may play out, but we can at least set out the questions that events themselves will begin to answer sooner rather than later. Michael Clarke sets out the problem areas.

We all understand that the COVID-19 crisis will have some very significant long-term effects on global politics, though what they will be is a matter of pure speculation at this juncture.

Nevertheless, it is possible to identify, even now, some of the geopolitical questions that will be answered in the coming months and years, as the world takes stock of a modern ‘plague year’. COVID-19 is an indicator of the increased vulnerability of globalised politics to public health challenges; all made more acute now by population growth, migration, urbanisation and unprecedented levels of international travel.[1] It was an event that was emphatically not beyond our imaginings, but – with a few notable national exceptions – certainly beyond any global appetite to plan for it.

Some obvious questions therefore arise from 1) the public health issues themselves; 2) the geo-economic effects; and 3) from the broader effects on politics and governance around the world.

The Direct Effects of a Global Public Health Crises

How many publichealth systems might be catastrophically overwhelmed? Which public health sectors will be unable to deal with COVID-19 and also brought down in other health sectors by it and left in a state of evident collapse?

Will COVID-19 potentially affect states in all climate zones equally? Or will this strain of the virus be less virulent in warmer climates and therefore be less contagious and less challenging to some less developed countries? Epidemiological evidence so far is ambiguous and will not become clearer until later this year.

How will states that are already politically stressed deal with more dramatic and demonstrable government failure? What will be the effect on popular legitimacy in highly fragile states like Venezuela, Zimbabwe, Bangladesh, Pakistan, Yemen, Nigeria, Mali, etc? Will a major public health crisis exacerbate existing political tensions in less fragile but highly troubled states such as Iran, India, Brazil, or Saudi Arabia?

How will public health stress play out in obviously authoritarian states? Russia, Belarus, Kazakhstan, Tajikistan, North Korea, Hungary etc.? Many authoritarian leaderships are using the health emergency to bolster their own power, but will this necessarily work if their policies are not successful in sustaining their public health systems against a ‘viral plague’. China will be able to adopt even more authoritarian policies as a result of its greatly enhanced lockdown surveillance technologies, but China is also a special case.

Will some Western governments suffer a rapidcollapse in public confidence? If ‘political spin’ will come up against empirical truths in free societies, and some governments are seen to have presided over avoidable public health disasters, will there be political realignments on the basis of new popular demands for more technocratic leadership?

Will COVID-19 cost President Trump the election in November? In the US, the governmental reaction to the crisis has been highly politicised from the beginning.[2] Mr Trump, and then President Trump, has enjoyed a remarkable run of good luck since 2014. All his bad luck seems now to have come in one hit. The USA may well now be heading for a Biden presidency as the economic impact of the crisis affects the real US economy. President Trump’s route to victory in November was anyway becoming a narrow one as swing states like Pennsylvania, Ohio or Michigan experienced rapid rises in unemployment in 2019, and that route now that looks increasingly fraught, notwithstanding a small ‘rally round the flag’ increase in presidential popularity. If COVID-19 and then the economic damage it does in the US proves to be President Trump’s political nemesis, that fact alone may drive an even bigger reassessment of US domestic and foreign policy under a Biden presidency than could have been anticipated even a month ago.

How fundamental will be the reassessment of ‘national resilience’ around the world? There will be a great focus not just on national public health resilience in various countries, but probably also in other ‘strategically important’ supply chains. COVID-19 has been a wake-up call over some of the market-driven downsides of globalisation. This question might be answered by predominantly national behaviour (through stockpiling, on-shoring production, regionalising supply chains, etc.) or, somewhat less likely, by new approaches to regional and international solutions – or perhaps a mix of the two. Either way, the ‘resilience reaction’ will probably create more protectionist pressures on global free trade.

How will the battle of the narratives resolve itself? China and Russia have already embarked on vigorous counter narratives to disguise some underlying realities and China’s responsibility for COVID-19. There is also a battle of narratives taking place over the most effective responses, foreign aid policies and international priorities. If the less developed world is badly affected, there will be even more angry finger-pointing than presently among the rich nations. At least in the western world, a single, accepted narrative will probably appear quite soon; neither China nor the US will probably emerge from it with much credit. But more globally, will COVID-19 be effectively weaponised in a wider battle for influence?

What are the upsides to this public health crisis? COVID-19 might be regarded as a dress rehearsal for a time when something much more deadly than COVID-19 appears. SARS (2003), MERS (2012) or Ebola (2014-15) did not become genuinely global in the way COVID-19 has. COVID-19 may become a watershed event in more urgent and effective preparations for global pandemics that might involve viral shocks with much higher inherent mortality levels.

It emphasises the intense pattern of global human contact (not well understood before). The data derived from its spread can be modelled for other useful purposes outside the realms of public health. Perhaps it will stimulate better research on the deeper dynamics of globalisation, not least in the complexity and vulnerability of modern supply chains.

COVID-19 also has the effect of stress-testing the societal resilience of many different communities around the world. It may reveal something about modern attitudes to risk, conformity and collective endeavour in different social systems and under different political regimes.

Throughout the western world, mainstream news media have emerged – despite the social media explosion – as the most trusted conduit of information that most people want. The BBC and mainstream national and local media are in a position to capitalise on one of their fundamental USPs – trustworthiness in a crisis – if they maintain and preferably enhance, their journalistic standards. Social media outlets, while maintaining entertainment value in the lockdown periods, are possibly facing big credibility challenges, and the ‘cooperation’ of the big platforms in squashing fake news may not be enough to prevent them taking a big credibility hit afterwards. This crisis may give traditional, honest news values a new lease of life in western societies just when they needed it.

Geo-economic and geo-political effects

Will the global economy slip from ‘planned recession’ into ‘unplanned depression’ and deflation? The effects of national lockdowns in western countries creates the certainty of recessions (two successive quarters in which an economy contracts), since this is what the lockdowns are designed to achieve – to pause most economic activity for at least three months. And it comes on the back of a global economic picture that was teetering on the edge of recession before COVID-19 struck. But there is every chance this will now become a depression (where there is a spiralling dynamic of economic contraction, not just a lack of growth). Unless the pandemic passes very quickly – which now seems highly unlikely, the economic damage seems set to be worse than in 2008-9. And as a result of the ‘austerity decade’ since then, the deflationary shock of global zero interest rates, and the fact that central banks and international institutions exhausted most of their economic weapons in the 2008 crisis, it is difficult to see the economic impacts of COVID-19 being restricted to merely a bigger dip in a cyclical recession.

Which countries will suffer a sovereign debt crisis, that will therefore affect all their economic sectors? Some significant countries such as Argentina, Greece, Egypt, Sri Lanka, South Africa or Nigeria were already facing the growing dangers of sovereign default. Within the European Union, that also applied to such a significant country as Italy, which is now facing the certainty of it, unless EU members and the European central bank bail it out. Sovereign defaults in one or two significant countries would likely lead to a waterfall of defaults across the system. So; will any significant sovereign defaults occur before the end of 2020, and if so, where?

Which sectors in all countries will be severely damaged? Some sectors – like aviation, tourism and hospitality, oil and gas, or automotive industries – will be at a debilitating low point for some time to come. That will have deep effects on some economies (like tourism in Zimbabwe, Kenya, Seychelles, or Thailand) and very disruptive effects even on powerful others (like the automotive industry in Germany, Japan or the US). As sector-wide economic damage becomes clearer, which countries will be most exposed to key sectorial damage?

What effects will the staggering of COVID-19’s impact across the world have on its economic aftermath? It appears that the pandemic will take at least six months to sweep across the world, and possibly reappear thereafter in intermittent ways, before global public health measures can suppress it. Its staggered impact may be helpful for ramping up public health manufactures and for sharing and distribution elsewhere in the world during 2020-21. But it will make it difficult to coordinate economic recovery actions. Sub-Saharan Africa, parts of Asia and Latin America could still be in COVID-19 crisis when the G7 countries are trying to ramp up again, and they may suffer travel and investment droughts just at the time when they need most economic stimulus.

Will some governments in dangerous neighbourhoods collapse? Some key countries in dangerous neighbourhoods are at risk of straight governmental collapse if the public health crisis, and then the following economic crisis, cannot be managed adequately. In the Middle East, the Iranian government is in deep trouble already. So, it seems is the Saudi leadership. In South Asia, the government of Pakistan is already in significant trouble and the Indian government soon may be. In East Africa, Egypt, Sudan, South Sudan and Somalia are all struggling to maintain themselves against growing domestic opposition of various kinds. Will some of the governments in these sorts of trouble implode and provoke more regional instability?

Will ongoing regional and civil wars be effectively unaddressed for some time? Conflicts in Yemen, Afghanistan, the Sahel countries, Libya, Syria or Iraq, for example, will struggle to get much international attention as they deteriorate. Or, will any ruthless actors see an opportunity to clean up while the global crisis lasts; such as Russia and the Assad leadership in Idlib; Turkey in other Kurdish areas of Syria and Iraq; the Taliban in Afghanistan; Russia, the UAE, Saudi Arabia and ‘General Haftar’ in Libya; or Iranian-led militias taking control in Iraq – getting western forces out quickly, or else pushing their Houthi rebels towards complete victory in Yemen? Many autocratic leaderships cannot resist trying to exploit a good crisis when one exists, even when their own countries suffer the effects.

Is India another special case? On 24 March the Indian government gave four hours’ notice of a total lockdown of its 1.3 billion people. The results have been predictably chaotic and have thrown India into a deep and immediate social and economic crisis. Without any of the autocratic apparatus and police conformity available to China – the same size as India – in operating a national lockdown, the actions of the Delhi government appear catastrophic. India’s only realistic hope is that COVID-19 may not affect the Indian population so widely, if differences in climate turn out to make a difference to the spread of the virus.

But if COVID-19 runs through the country as presently anticipated, will India suffer the worst of all worlds – a largely ineffective lockdown, all the economic damage that will do, alongside a massive public health crisis? If so, the geopolitical implications for relations between Delhi and Beijing and across the Indian Ocean are likely to be profound and long-lasting.

How will China emerge from this in world politics? The government of Xi Jinping is unlikely to suffer any greater domestic opposition as a result of COVID-19, partly because it has used the opportunity to drive opposition further underground and extend state surveillance even more, and accompanied it with a massive civic campaign to take pride in how the crisis was handled and to obscure discussion over how it started. China has also been highly opportunistic in making the most of US insularity – moving into the soft power space the US has vacated over COVID-19 – and has demonstrated very publicly its aid and increased production to other states in the EU and the developing world.[3]

China will prop up North Korea whatever happens as a result of Pyongyang’s own COVID-19 problems, alongside its latest provocative rocket tests. But China might use the public health rationale for more controlling moves in Hong Kong and more aggression against Taiwan while the western world is distracted, especially after the Hong Kong protests had such a hardening impact on political opinion in Taiwan.

But will China lose across the world in the long term? Chinese growth, already slowing, will be held down by the global recession/depression of 2020-21. Greater ‘resilience’ planning elsewhere may replace some important Chinese supply chains to the rest of the world. There may be some related international push-back against over-reliance on Chinese companies such as Huawei, ZTE, Alibaba, Baoshan, SAIC Motor, TenCent, CRRC, or Shenhua Energy, among many others. China’s ‘Belt and Road’ initiative will certainly slow down and may demonstrate more national pushback against it than new opportunities. Not least, some very unstable states, like Pakistan, Mongolia, Laos, Kyrgyzstan, Tajikistan, Djibouti, Maldives, and Montenegro all owe more than 45% of their GDP to China; China owns large portions of sovereign debt all over the rich world; Chinese investors hold up to 25% of government bonds even in Britain and the US. Unless it practices extensive debt forgiveness (at a very difficult time) the Chinese government and its individual investors may be the instrument of many sovereign defaults in different parts of the world.

So, will the alternative ‘Chinese model’ of authoritarian order seem a lot less attractive if Beijing invites suspicion over its motives and triggers defaults? Or, will Beijing perhaps seize the opportunity of US introspection to demonstrate a level of responsibility for global economic order and bear burdens that only the United States had previously assumed?

Is the US about to suffer a COVID-19 catastrophe and become, in both relative and absolute terms, the worst case among the G20? Before the end of March, levels of infection in the US were the highest in the world and the anticipated death rate is now set at the hundreds of thousands during this year – and being compared to the 60,000 deaths over ten years during the Vietnam War. US jobless benefit claimants since 1967 seldom went over half a million a year, and even in 2008 only touched 800,000. In the first week of April 2020 it shot up to 10 million and by mid-April was over 16 million. Whatever this means for President Trump’s re-election, it may indicate the beginning of a deep social and economic catastrophe for the US as a country.

Historically, the US has been quicker into, and then quicker out of, global economic turndowns. There may be a pent-up demand boost awaiting the US economy if it comes out of the crisis quickly. But that will largely depend on how long the US lockdown and consequent disruption lasts, and the real nature of the economic – and social – debris it leaves behind. COVID-19 has recently been described as a potential ‘disaster amplifier’ for a US economy that does not cushion itself from economic shocks but instead relies on protecting capital, maintaining credit, and letting labour markets find their own equilibrium.[4] The US economy simply cannot be ‘shut down’ and then ‘re-started’ without massive social pain. Economic confidence in the ability of the US to recover quickly might evaporate if the country is seen to fall into a catastrophic cycle of public health overload, social distress and economic stagnation that lasts into 2021 or beyond.

The US accounts for 25% of global GDP, so if it is able to bounce back quickly, the world economy will undoubtedly benefit. But if it does not, and with China consequently taking a big economic hit, it is difficult to see how a global deflationary spiral will be avoided.

Will US/China relations deteriorate markedly? Despite the ‘battle of the narratives’ both Washington and Beijing understand the economic importance of their relationship to themselves and to the rest of the world. Nevertheless, developments to date all suggest increasing protectionist pressures and little further progress towards a genuine new trade arrangement between them.

So, will the US and China – even tacitly – agree to play it long in economic and political terms, finding ways to cooperate in fending off sovereign defaults around the world and help stimulate global recovery?[5] Or will China, emerging earlier from COVID-19 and revving up its economic engine, seek to displace US economic influence wherever it can? And will the US be able to emerge from its economic standstill quickly enough to help stimulate global production and prevent Chinese economic displacement? If it cannot, increased protectionism and considerable political tension between the two seems likely to result.

Effects on International Action and Global Governance

Is the poor international response to COVID-19 just a late start or a significant sign of collapse in international society?

In response to a crisis that – by the beginning of February – was evidently going to be global in scope, the G7 countries did not meet (remotely) to discuss it until 25 March; the G20 not until 27 March. Both sets of discussions were fruitless. And while the medical professions focussed their attentions internationally, the World Health Organisation was shown to be toothless – and frightened of offending China – and acted merely as a conduit for bad news more than a proper coordinating body. The early political responses were almost exclusively national. The EU – despite sending medical aid to China – could not agree on a combined response for one of its own when it most needed help over the massive concentration of COVID-19 in northern Italy. Nation states have been individually scouring world markets to buy up essential medical equipment for their own use; international procurement strategies have been largely cast aside.

The contrast to the 2008-9 economic crisis, where the G8 and G20 acted effectively, has emerged starkly. So, too has the example of the international Ebola crisis in 2014. In that case, President Obama created a US-led international approach of some 70 countries to fight Ebola, and it was successful. The world took for granted that the US would lead in a case like that.[6] But in the COVID-19 crisis it certainly has not and the ‘leadership gap’ – which China has shown some aspirations to fill – has become very clear to the rest of the world.

It is also a particular problem for the EU, which of all international institutions, should be best able to regulate the necessary distributive and economic policies for its members. But it was largely ignored by its members in the first phase of the health crisis, and will be under enormous pressure in the economic follow-on crisis just now beginning. The ECB has thrown a 750 billion Euro stimulus package into the EU’s economy, but with Italy now borrowing at 135% of its GDP, the ECB, and its ‘austerity members’ like Germany and the Netherlands, will have to prop up Italian deficits, as a first priority, for some time to come, even as other vulnerable members emerge. They will have to smash through the fiscal prudence rules that have (just about) anchored the Euro over the last decade, which, in itself, may well plunge the EU into a new existential crisis.

Germany has taken some of France’s and Italy’s acute COVID-19 cases and has promised to do more. It has sent some essential equipment to Britain. China and Russia have delivered eye-catching aid to Italy, Serbia and some states in Africa, as well as selling medical supplies to the US. But if there is any meaningful international response to COVID-19 – from the EU, the US and China – it will now be in some sort of ‘phase 2’ period. And it can only begin to have any significant impact as individual countries emerge from their own national lock-downs.

Will the major powers be shamed by their rush to national responses – particularly in relation to medical supply chains – and consciously internationalise their responses during the next phase of the medical challenge? Or will this crisis simply reinforce a fashionable scepticism about international society and lead to more nationally-orientated thinking about public health and similar problems? And to what extent will attempts to stabilise the global economy draw the same lessons? The different and uncoordinated nature of national lockdowns, plus the widespread domestic introspection as all countries try to stabilise their own societies against COVID-19, make international economic coordination much more difficult than in 2008-9. Will the major powers and the global economic institutions be willing, and capable, of fashioning an effective collective response to the recession/depression scenario facing the world during the rest of 2020?

Not least, will the novelty, speed and extent of the COVID-19 crisis become a tipping point – for good or ill – in the faith global populations have in international approaches to common problems?

Are we sacrificing civil liberties in the immediate responses to the crisis? Police enforcement actions during national lockdowns are essentially trivial, even if overdone in some countries. But they will pass with the lockdowns. Further down the road, mass COVID-19 testing and (possibly compulsory) vaccine programmes once a vaccine is developed, will raise some difficult ethical and civil liberties issues, not to mention anti-Vax opposition.[7]

But more immediately important are the emergency powers most governments have given themselves to deal with the crisis, the immediate creation of ‘leviathan states’ as even conservative governments have created massive command economies, and the levels of electronic surveillance that have been used to track COVID-19 and social distancing within their societies. These special measures will not soon be given up as the COVID-19 virus hangs around into 2021. And they will not easily be given up by any governments, who normally find that such measures can be adopted far more easily than they can be relinquished.

Some governments, like those in China, Kazakhstan, and even Hungary, have explicitly used the health emergency to try to strengthen personal dictatorships. The Putin government has tried to use the COVID-19 crisis (and western sanctions) as an explanation for national economic failure and strengthened the claims of President Putin to stay in power until 2036.

Most western democratic governments will likely be driven to legislate greater safeguards and oversight mechanisms to cover powers they cannot, or will not, easily relinquish. And in this era of market-dominated neo-liberalism, almost all western governments have now enmeshed the state more deeply in their own economies than they know how to handle.

So, will authoritarian leaderships who have manipulated the health crisis get away with it if, in reality, their countries cannot handle the health and economic consequences of COVID-19? And will democratic societies adjust with legislation to greater levels of electronic surveillance that will hereafter be regarded as necessary weapons against this and any future pandemics?

Is an anti-populist zeitgeist being stimulated by COVID-19? Notwithstanding attempts to manipulate this crisis by authoritarian leaders, there is some truth in the idea that COVID-19 ‘is immune from political spin’.[8] The results of the spread of the virus, sooner rather than later, become hard figures that brook little argument between politicians. Governments are being judged on the effectiveness of the non-ideological, purely technocratic, decisions they are taking. They are being judged mainly on their competence to deal with this one, narrowly defined, critical, series of health and related economic crises.

In Britain, COVID-19 has already been heralded as the ‘crisis of conservatism’, not because the Conservative party might lose the 2024 election – which seems very unlikely[9] – but rather because this crisis has already destroyed the whole fabric of Conservative economic policy since 2010; it cannot easily be restored in any event; and no party in Britain now has a social and economic policy that gets near the levels of need that will probably emerge in the coming years.

So, what sort of post-COVID-19 economic philosophy will emerge within the G20 countries from a series of ‘new leviathan’ states that will find it difficult to go back to the status quo of 2019? And which politicians and leaders will emerge from the crisis with enhanced credibility as leaders, as opposed to those who sounded more ‘political’ than ‘competent’ when it really mattered? In other words, we might wonder how far the COVID-19 crisis will re-set the political dial in response to a drastically new relationship between economy, society and the state.

Michael Clarke

Professor of Defence Studies

Co-author of Tipping Point: Britain, Brexit and Security in the 2020s

[1] Global population growth is slowing but at 7.3 billion, is 3 times what it was in the Spanish Flu of 1919-20; international migration is now double what it was (at almost 4%) 30 years ago; urbanisation moved from 35% – 60 % globally (and is 85% across Europe).

[2] Up to the end of March 2020 most leaders in free countries had seen their approval ratings improve as the crisis has bitten; some have declined slightly. But President Trump’s approval ratings have remained almost completely consistent since December, until a small 5% increase in after 27 March. See FT 1 Apr 2020.

[3] In January the EU sent 70 tonnes of medical aid to China, but was required by Beijing to bear due regard to its ‘sensitivities’ and not trumpet the gesture within China. In March, Beijing (and then Moscow) made enormous propaganda out of the highly selective medical aid they gave to Italy, when the EU response had looked so shoddy.

[5] In the 2008 crisis the Federal Reserve essentially saved the banking system and Chinese expansion essentially saved the trading system. It was a good division of responsibility. Clarke and Ramscar, Tipping Point, Chapter 2.

[6] The US led a 70-nation effort to control, and then defeat, Ebola in 2014-15. See Lisa Monaco, Foreign Affairs, 3 March 2020.

[7] Given what seems to be the uniquely contagious nature of COVID-19 and some of its other current characteristics, it is possible that refusing a vaccine would be regarded as socially irresponsible or even potentially criminal.

[8] Phrase first used in march 2020 by Lord (Peter) Hennessy in discussing the crisis.

[9] On the basis that an 80-seat government majority is difficult to overturn and the Labour party is still in a state of civil war that will make it difficult to mount a challenge to the government on economic-technocratic grounds as it deals with the aftermath of the crisis.